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Assessing the distributional effects of financial development on consumption-based carbon emissions in Sub-Saharan Africa: a quantile-based analysis

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Abstract

This study assessed the role of financial development (FD) and its distributional effects in explaining consumption-based carbon (ConCO2) emissions, in a framework that also examined the environmental Kuznets curve (EKC) hypothesis, in the context of 19 Sub-Saharan African countries. A composite index was used as measure of FD in a set of data spanning over the period 1995–2017, while controlling for population size (PS), energy intensity (EI) and natural resource rents (Nrr). Given that the variables deviate from expected normal distribution as adjudged by results of pre-estimation tests, the method of moments quantile regression (MM-QR) estimation technique was used to account for distributional effects of FD on ConCO2. Results of the fixed-effect regression based on Driscoll-Kray standard errors (FE-DK) which was validated by three other estimators (fully modified ordinary least squares (FMOLS), dynamic ordinary least squares (DOLS), canonical cointegration regression (CCR)) statistically provided support for FD, PS and EI as drivers of ConCO2. Distributional effects of this show that FD exerts significant positive effect on ConCO2 among countries in the higher quantiles, but insignificant positive effect among those at the lower quantiles. The model provided no support for the EKC hypothesis for SSA; policy implications of these results were presented.

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Fig. 1

source: World Development Indicators, World Bank

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Data Availability

The datasets used and/or analysed during the current study are freely available as follows: Global Carbon Budget (Friedlingstein, et al., 2019) is available at https://10.5194/essd-11–1783-2019; WDI available at https://databank.worldbank.org/source/world-development indicators#advancedDownloadOptions; financial development index is available at http://data.imf.org/fdindex; and World Uncertainty Index is available at https://worlduncertaintyindex.com/wp-content/uploads/2020/07/WUI_Data.xlsx.

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Acknowledgements

The authors would like to thank the responsible editor and anonymous reviewers for their time and suggestions which were most helpful in improving this paper.

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Authors and Affiliations

  1. Department of Economics and Development Studies, Alex Ekwueme Federal University, Ebonyi State, Ndufu-Alike, Nigeria

    Lasbrey I. Anochiwa, Tobechi F. Agbanike, Marius Ikpe & Richard O. Ojike

  2. Department of Accountancy/Banking and Finance, Alex Ekwueme Federal University, Ebonyi State, Ndufu-Alike, Nigeria

    Paul C. Obidike

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  1. Lasbrey I. Anochiwa
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  2. Tobechi F. Agbanike
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Contributions

LIA conceived the idea, designed the study and wrote the initial draft of the manuscript. TFA wrote the introduction and methodology of the study. MI reviewed relevant literature, collected the data for the study and wrote the conclusions and policy implications. Formal analysis and investigation, and discussion of results were performed by ROO while PCO supervised the study and revised the manuscript. All authors read and approved the final draft of the manuscript.

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Correspondence to Lasbrey I. Anochiwa.

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Anochiwa, L.I., Agbanike, T.F., Ikpe, M. et al. Assessing the distributional effects of financial development on consumption-based carbon emissions in Sub-Saharan Africa: a quantile-based analysis. Environ Sci Pollut Res 29, 49870–49883 (2022). https://doi.org/10.1007/s11356-022-18671-8

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